Key characteristic of a coupon yielding bond when first issued

A first answer is that you may need a business case when working in any of these areas. Secondly, you need a business case wherever it is required. Business people today are rapidly losing tolerance for management error. As a result, They also demand real accountability for decisions and plans. And, everywhere, the competition for scarce funds is increasing. Therefore, many organizations now require a business case for formal process areas such as these:.

Note especially, however, that a business case requirement does not, by itself add value to the process. This kind of demand is worthwhile—enforceable—only where there are business case standards. Standards are indispensable wherever BCA is required. The reason is that decision makers and case builders must ultimately agree that a given case is or is not acceptable. Reaching agreement is difficult or impossible, absent clear, objective standards. If you are asking these questions, you are not alone. Sections below address these questions through an overview of essential case structure and content.

The business case has much in common with the legal "case" in a courtroom trial. Both cases present a rationale reasoning and support it with evidence. Both the trial lawyer and the business case writer are free to select or ignore evidence.

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And, both are free to structure arguments as they wish. Whether or not the message succeeds depends on their ability to tell a convincing story. And, usually, there are many ways to tell a compelling story. Consequently, there is no single correct outline or content list for the business case. Looking beneath the surface, however, good cases of both kinds have much in common. Good business case examples, for instance, present rules for deciding which evidence belongs in the case. They also have "laws" that disqualify other information that does not belong in the case. A solid business case, therefore, has a "building block" stipulating case scope and boundaries.

This block serves decision makers who must know that the case includes all relevant costs and benefits while excluding unnecessary costs and benefits. Clear and precise scope and boundaries statement s make this possible. Absent essential building blocks of that sort, intelligent readers sense the lack instinctively, and case credibility suffers.

We cannot prescribe a single business case outline for all situations. We can, however, identify essential building blocks of this kind. Also, experienced case builders also aim to position basic blocks in a logically sound structure. Also presented here, therefore, a well-established, proven business case structure, the 6D Framework. TM Structure helps communicate the reasoning—the rationale—that "makes the case. Note that stages D-word name. These names were chosen, first because they are easy to remember, and also because they describe the purpose of each step.

The 6D framework serves, firstly, to outline the case building process. A more detailed summary of the process stages appears immediately below. Secondly, however, the same stage names also describe case report structure and contents. See, for instance, the complete case report outline near the end of this article.


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Note especially that each process stage leads to a significant report section with the same name. As a result, report structure mirrors process structure, exactly. Dual use of the framework in this way is intended. Remember that case building means, above all, building and supporting a rationale.

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Case reports are valid, moreover, when they communicate the rationale directly and openly. Here, because process and report have the same structure, readers are led down the same logical path the case builder has just traveled. Cases built this way are likely, therefore, to survive critical scrutiny, provide useful guidance, and predict what happens.

Stage 1 Define the Case Write the subject statement. Describe proposed actions and scenarios to analyze. Also, Identify business objectives addressed. Write the purpose statement.


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Explain who will use the case and for what purpose. Also, describe information the case must deliver to meet the purpose. Also, show how these objectives align with business strategy. Also, explain how current threats and constraints impact action choice. Stage 2 Design the Case Designate case scope and boundaries. Explain whose costs and whose benefits belong in the case. Also, stipulate the analysis period in view. Identify essential assumptions for projecting costs and benefits. Develop reasoning to legitimize outcomes as benefits. Explain how the analysis values non-financial outcomes in financial terms.

Present one cost model for all scenarios. Identify all relevant cost categories for the case. Also, Identify cost items for each category. Also, explain methods for estimating costs. Stage 3 Develop the Case Project scenario costs and benefits as cash flow events. Also, project impacts on non-financial "key performance" indicators KPIs. Stage 4 Decide the Case Analyze and compare financial metrics from each scenario. Compare impacts on Important KPIs.

Show how underlying assumptions impact business results. Measure the likelihood of different outcomes. Also, identify significant risks. Stage 5 Deploy the Case Recommend one scenario for action. Set targets for critical success factors and contingencies. Provide tactics for lowering costs and increasing gains. Also, provide tactics for accelerating gains. Identify risks to monitor over time. Also, provide tactics for mitigating risks. Stage 6 Deliver the Case Plan and implement the recommended action scenario.

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Also, show how to accelerate gains. Also, validate and update significant assumptions continuously. The list shows case-building steps and building blocks in a particular order. Note that stage sequence is vital, but the ordering of blocks within each stage is also crucial. There are many kinds of business cases on many subjects, but most have one characteristic in common.

Analysis results, in other words, focus on business benefits, business costs, and business risks. Above all, analysis results predict progress towards meeting business objectives. These two items together—target objectives and proposal actions—are the business case subject. Together, they define the central focus of the business case. As a result, both the case building project and the case report should begin with a clear subject statement.

This statement describes precisely which actions the author proposes, as well as the business objectives they address. In other words, case builders should explain first what they recommend doing and why the organization gains from the action. Notice that committing to an action presents decision makers immediately with new questions and choices.

A decision to bring a new product to market, for instance, raises questions such as these right away:. To develop case scenarios for the action product launch , the analyst anticipates such questions and then assumes specific answers. The analyst may propose several different sets of answers to these questions.

As a result, each set of answers defines a unique proposal scenario. In this way, asking and answering these questions, therefore, provides a basis for estimating scenario benefit and cost outcomes.

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Some case builders rush into making cost and benefit estimates as soon as they write the subject statement. It is too early for that, however, because the case is not yet fully defined. The case builder must first answer "purpose" questions like these:. Case builders write a formal purpose statement that answers each of these questions in clear and specific terms. They usually try to complete both the purpose and the subject statements as early as possible in the Define stage. Finishing these items before moving on to anything else in the case is crucial.

That is because these statements, together, are mainly the core of the case definition. Without them, no one can know for sure which costs and benefits belong in the case. Regarding the third bullet above, case purpose, note again that cases serve different purposes in business. The case purpose can be to address:. Such questions appear with increasing urgency for business people everywhere.

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They turn up, often, in private industry, government, and the non-profit sector. Note also, that some business case results serve all four purposes. Consequently, a well-written purpose statement serves case builders and case readers alike. It tells case builders just what must appear in case results. It tells case readers precisely what to expect in case results. Not all case builders understand the meaning of "business case success" alike.

To the manager seeking project funding with a business case, project funding approval might seem like a success. To the salesperson, closing a sale with a BCA might seem like a success. Granted, any decision in the case builder's favor feels like "success. In reality, they may be lowering their chances for a favorable decision. Case builders better serve their interests—and their organizations—by defining business case success differently.

The most useful definition, however, takes the view of those responsible for using case results. From their point of view, a successful business case meets three criteria:. Case reviewers may know a lot, or they may know little about what to look for in case results. Always, however, you can be sure they know this much. The business case looks into the future.

Moreover, everyone knows that future predictions always come with some level of uncertainty. As a result, reviewers will believe they must address questions like these:. Case builders cannot remove all uncertainty from case results. They are predicting the future, after all.

However, they can reduce risk and measure what remains. Reviewers may believe every word and number in the case, yet still, lack the confidence to act. Usually, this means the case builder did not fully anticipate what reviewers expect to see in case results. A bond can be bought and sold on the secondary market, subject to there being sufficient liquidity in the market. The value or price of a bond may fluctuate due to a number of factors such as interest rate movements and the perceived credit worthiness of the issuer.

A government bond is a bond issued by a national government usually denominated in the country's own currency. Corporate bonds are issued by companies ranging from large institutions with varying levels of debt to small, highly leveraged, start-up corporations. The most important difference between corporate bonds and government bonds is their risk profile.


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Corporate bonds usually offer a higher yield than government bonds because their credit risk is generally greater. This is not always the case, however, as we have seen more recently. For example, suppose you bought , nominal at a price of This is a German Government Bond with a 2. Note, the prices quoted in the above examples will vary over the lifetime of the bonds. Yield is the annualised return that is earned on a bond, based on the price paid and the interest payments received. There are many different ways to measure a bond's yield, the most common is yield to maturity.

This is the total return an investor will receive by holding a bond until it matures, including all the interest received from the time of purchase until maturity, plus any gain or loss if the bond was purchased at variance to its par value. It should be noted that a bond's price will fluctuate during its lifetime and that this will impact its yield. A bonds yield moves inversely to its price. When a bond's price rises, its yield decreases and conversely when a bond's price falls, its yield increases. However if it is purchased at a discount, for example 90 per nominal the yield rises to approximately 6.

Investing in Bonds is not without risk. Bond prices can be volatile. The overall market may fall, or the Bond that you invest in may perform badly. The value of your investment may go down as well as up. Past performance is no indication of future performance. Investments denominated in a currency other than your base currency can be affected by exchange rate movements when converted back to the base currency.

This is the risk that an issuer will be unable to make interest or principal payments when they are due, and therefore default. Fixed income investors examine the ratings of a company in order to establish the credit risk of a bond. Ratings range from AAA to D. Bonds with a ratings at or near AAA are considered very likely to be repaid, while bonds with a rating of D are considered to be more likely to default, and thus are considered more speculative and subject to more price volatility. As bonds tend not to offer extraordinarily high returns, they are particularly vulnerable when inflation rises.

Inflation may lead to higher interest rates which is negative for bond prices. Inflation Linked Bonds are structured to protect investors from the risk of inflation. The coupon stream and the principal or nominal increase in line with the rate of inflation and therefore, investors are protected from the threat of inflation.

More information on the risks of investing in bonds.